PETER'S NEW YORK, Tuesday, July 7, 2009--Democratic U.S. Rep. Scott Murphy, D-NY, must bill himself as a populist, since he recently had occasion to mingle with his constituents. In the event you do not recognize his name, Murphy was the candidate who won a special election in March to fill the vacancy created when Rep. Kirsten Gillibrand was appointed by New York Governor David Paterson to replace U.S. Sen. Hillary Clinton, who in turn became Secretary of State for the Obama Administration. Murphy put in an appearance a week ago today at his brand new congressional offices in Glens Falls, New York, a mile from where he resides. It's been a very wet summer so far in the Northeast, but impending rain did not discourage people from coming out to meet him.
Murphy arrived a few minutes late, followed by cadre of attractive young staff members, all carrying calling cards emblazoned with the insignia of the United States of America. The staff cordially greeted constituents who had gathered to hear their new congressman and to air their grievances. As an impending rain storm threatened to disperse the crowd, Murphy, trying to keep his remarks brief, delivered a summary of what he had encountered in the House of Representatives thus far, and the bills he had voted for. One bill that it became clear he did not support calls for an audit of the Federal Reserve.
In case you don't already know what the Fed does, it is a bank that issues the United States currency, something that the U.S. government is supposed to do. It also regulates the supply of that currency, and therefore its value. And it uses the aforesaid functions to manipulate what is supposed to be a free market, in the name of promoting a healthy economy. It also has some bank regulatory powers.
A previous U.S. president, Andrew Jackson, killed an earlier version of the Fed by letting legislation for it expire. That was in 1836, and it was about 77 years before Congress ushered in the latest version of a national bank, a concept that had haunted the nation since its very inception.
"I did some research," Murphy said in response to a question about the audit by Glens Falls businessman and Albany Times-Union newspaper blogger Matthew Funiciello. "It turns out the Federal Reserve is privately audited." Later, repeating the point, he said, "I'd love to get out the fact that it's been audited, and make sure people can read it."
That may have been reassuring to some, but five minutes of looking into the matter on the web might change their minds. Surely Murphy could not have missed the fact that 244 members of the House have signed up as co-sponsors of a bill to "audit" the Fed. If it is being audited regularly, are these members making fools of themselves and wasting taxpayer money pushing for a law to carry out what is already being done? Not very likely.
A quick internet search will reveal the cause these members are supporting. The name of the bill is HR 1207, "The Federal Reserve Transparency Act of 2009." What does this bill do? It strikes some important language from the U.S. Code that restricts the power of the Comptroller General to audit the Fed.
What is it that cannot be audited under current law? The law says that audits of the Federal Reserve shall not include:
1) transactions for or with a foreign central bank, government of a foreign country, or non-private international financing organization;
2) deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations;
3) transactions made under the direction of the Federal Open Market Committee; or
4) a part of a discussion or communication among or between members of the Board of Governors and officers and employees of the Federal Reserve System related to clauses (1)-(3) of this subsection.
In other words, the Comptroller General shall not ask questions about the Fed's dealings with, say, the Bank of International Settlements, the International Monetary Fund or any other of the world's central banks, according to the first point. We may not know how much money has changed hands between the Fed and any of these institutions, nor may we know what kind of instructions or dialogue has passed between them, or even whether Fed policy is controlled by the banking interests of another country or by the executive branch of a foreign government.
The Comptroller General's audit shall not apply to any matters regarding monetary policy. Now the conduct of monetary policy determines such parameters as interest rates and the purchasing power of the currency, matters which have a direct and deep impact on the daily life of the average citizen. We're talking here about people's mortgages, inflation, and the ability to obtain financing for businesses. The conduct of monetary policy may extend to matters of market intervention, which may include transactions in the foreign exchange, stock, bond and commodities markets in which many Americans hold a stake or are otherwise affected.
Third, the Comptroller General shall not audit transactions made at the direction of the Fed's "Open Market Committee." The Open Market Committee votes on measures the Fed will take in implementing monetary policy. This includes measures that affect the growth of the money supply, interest rates and the value of the dollar.
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